Why medical underwriting in retirement is a good idea

Retirees draw down a higher percentage income from their living annuities because they are struggling to make ends meet, according to the Association of Savings and Investments of South Africa (ASISA).

If however they are medically underwritten at retirement they may qualify for a higher monthly income especially if they suffer from a disease such as breast cancer. During breast cancer awareness month in October, women are reminded to consider the financial implications of the disease, especially in their retirement years when the prevalence of the disease increases. The cost of a mastectomy can be approximately R400 000.

The statistics speaks for themselves: according to the National Cancer Registry (2012) one in 26 South Africans will be diagnosed with breast cancer. About two out of three invasive breast cancers are found in women 55 or older. Furthermore, South Africa’s cancer prevalence rates are expected to increase by 78% by 2030.

Breast cancer has one of the highest survival rates of all the potentially fatal cancers and the financial implications are often underestimated. Apart from the financial pressure that comes with not having enough retirement capital, the added burden of unpaid claims from potential medical aid shortfalls in medical expenses adds to further financial stress.

“It is therefore beneficial that retirees who are purchasing an annuity income at retirement (or those who are already receiving an annuity income from a living annuity) are medically underwritten to determine whether they may qualify for a higher monthly income in retirement,” says Justine Wyatt, Legal and Compliance Executive at Just.

Wyatt says that 63% of Just’s cases quoted on to date were medically underwritten and qualified for a higher monthly income at retirement, including retirees who were diagnosed with breast cancer.

“Underwriting can be a long cumbersome process but at Just the underwriting process is literally a short call to the client. No documents need be completed unless the client does not want Just to call them, in which case they have an option to complete a short health profile questionnaire instead,’’ says Wyatt.

So how much more could you qualify for as a retiree if you were diagnosed with breast cancer?

In an existing Just breast cancer case study a retiree aged 63 qualified for a 12,3% higher monthly income as a result of being medically underwritten. She smoked eight cigarettes per day for the past 41 years. She was diagnosed with breast cancer three years ago. She completed surgery, a course of chemotherapy and radiotherapy. She is currently still using a hormone suppressant. She approached Just for a lifetime income which targets increases in line with inflation. An underwriter conducted a 15-minute call with her to collate her personal, lifestyle and medical information.

The retiree had a purchase sum of R786 345 at retirement. She would have received a starting annuity income of R4141 per month without underwriting and after underwriting this increased to R4723 per month.

Wyatt continues: “It is already difficult to live within your means at retirement and even more so if you have additional medical expenses to pay. Just has developed an innovative way in which to combine the best features of both living and guaranteed annuities to help you cover your basic living expenses while still having flexibility with your discretionary income. Retirees are fully medically underwritten to help protect themselves against the potential financial implications of an illness such as breast cancer. It is best when reaching retirement to meet with a financial adviser who will be able to help you choose the right options for your circumstances.”